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Spreading the Wealth: Hypertherm Becomes 100% Employee-Owned Company

Wednesday, January 15, 2014

Hanover — Larry Benson walked into the cafeteria of Hypertherm’s main plant on Tuesday expecting company officials to announce that the high-tech manufacturer of industrial metal-cutting equipment was buying out yet another competitor.

Instead, founder and CEO Dick Couch told the standing-room-only gathering — as well as employees watching via live Internet stream from 11 other sites around the Upper Valley — that Hypertherm’s 1,400-member work force now owns 100 percent of the company’s common stock.

“I never imagined anything like this when I started here 35 years ago,” said the 58-year-old Benson, the 14th employee hired by the company. “It just was a good place to work. They shared the rewards with us.”

In preparation for their eventual retirement, Couch and his wife, Barbara, decided at the end of last year to transfer their majority ownership stake into the company’s Employee Stock Ownership Plan (ESOP). The ESOP is a trust fund that has served as Hypertherm’s primary retirement plan since the Couches formed it in 2001 with 30 percent of the firm’s privately-held common stock.

“It’s a very big change,” Barbara Couch, the company’s vice president for corporate social responsibility, told the employees during yesterday’s announcement. “Dick and I and the entire management team see a very bright future for the company under shared ownership.”

Under an ESOP, employees become vested enrollees after a certain period, three years in the case of Hypertherm.

The shares are awarded based on length of service and cannot be sold until an employee quits or retires, at which point the company buys the shares back.

The Couches’ decision followed several years of considering how best to ensure the company’s continued success once the original owners were no longer involved. That included overtures from larger companies “that would love to own Hypertherm” and with potential investors, Barbara Couch said.

While the sale of the company would further enrich the Couches and other investors, it would also risk sacrificing Hypertherm’s company culture and commitment to the Upper Valley.

“Dick and I, in our hearts, could not live with that,” Barbara Couch said.

Added Hypertherm President Evan Smith: “It’s really a transfer of a sacred trust, to build on what (Dick Couch and co-founder Bob Dean) and what (the Couches) believed in.”

Dick Couch, who started the company with Dean in 1968 after patenting a water-injection technique that allowed metal to be cut faster and more accurately, told the workers Tuesday that employees will be provided training in the coming weeks to help explain how the new arrangement will affect them.

“We’ve got an awful lot to learn together,” Smith said.

In addition to the ESOP, Carey Chen, Hypertherm’s vice president and general manager of light industrial businesses, said the company also offers a 401(K) retirement program, as well as a profit-sharing system that has distributed $125 million to employees since Hypertherm turned its first profit in the 1970s.

“An ESOP is intended to be a retirement benefit,” said Chen, who joined the company in 2006. “It’s not meant to be trade-able, or a quick turnaround for people. The longer you stay with Hypertherm, the longer you’ll have to accumulate stock. If we do everything right as a company, the opportunity (to prosper) is three times greater now.”

Chen declined to put an overall value on the stock shares the Couches transferred to the ESOP.

King Arthur Flour’s Frank Sands formed an ESOP in 1996, and the baking company became 100-percent employee owned in 2004. Public-relations coordinator Julia Reed said on Tuesday that 102 King Arthur employees are fully-vested in the ESOP, while 172 are working toward fully-vested status.

Espen Eckbo, a professor of finance at Dartmouth College’s Tuck School of Business, said that the number of American companies establishing ESOPs has grown steadily since the first ones formed in the early 1980s.

He added that while some companies weight their ESOPs more in favor of executives than rank-and-file employees, those with more egalitarian ESOPs give average-wage workers the confidence of a fuller stake in the performance of the enterprise.

“Owning shares helps you identify with the company,” Eckbo said. “You create some loyalty, some identification with the firm.”

Tuesday morning, Barbara Couch thanked Hypertherm’s work force — which has almost doubled since 2005, thanks in part to the 2011 opening of a $35 million, 156,000-square-foot plant along Heater Road on Lebanon — for its loyalty.

“If anyone can ensure continued success for Hypertherm,” she said, “it’s you, our associates, throughout the world.”

David Corriveau can be reached at dacorriveau@gmail.com and 603-727-3304.